As globalization increases the complexity of supply chain processes, businesses are increasingly subscribing to analytical standards to improve their decision-making capacities and enhance the efficiency of their supply chains. To be able to survive the competitive environment and ensure qualitative progress, a business needs to invest in responsible supply chain management to efficiently and sustainably respond to disruptions.
A smooth-functioning supply chain ensures speedy fulfilment of goods and services delivery when catering to ever-changing customer demands.
On the flip side, it is interesting to note that an effective and agile supply chain carries numerous benefits for an organization in the long term. In the words of Gaurav Taneja, an EY leader, “A resilient supply chain is crucial not only to ensure current growth of the country but also to respond to future disruptive events.”
To that end, we will discuss the top 10 advantages of supply chain management that have a direct impact on the profitability and growth of a business.
Top 10 Advantages of Supply Chain Management
A supply chain begins with the procuring of goods and resources from a supplier and then moves on to the manufacturer, wholesaler, retailer, to finally end with the delivery of the manufactured product to the consumer.
Every aspect of the supply chain requires thorough monitoring and timely assessment to ensure productivity and maximized performance. This holds the power to either make or break a business. And supply chain management executives must ensure that these operations are carried out smoothly so businesses can focus on the quality of their services.
Here’s listing the main advantages of supply chain management:
1. Higher Efficiency
When a company’s supply chain operations which include the resource procurement, logistics, and delivery are strategically planned and executed, businesses can predict demand more accurately as well as cater to them. This enhances the efficiency of a company to adjust to disruptions, ever-evolving markets and fluctuating industry trends.
Supply chain leaders who invest in making real-time data available and have supply chain processes automated can avoid unnecessary delays in manufacturing and shipping. Since they have backup plans in case of resource procurement or inventory issues, they can better respond to challenges, which then helps improve customer experience.
2. Customer Retention and Experience
An effective supply chain management helps companies establish a strong reputation in the market. It increases a system’s effectiveness to respond to customer demands. This doesn’t just attract new consumers but also influences their loyalty to a brand. Businesses that prioritize customer service invest in effective supply chain management to ensure a seamless flow of goods and services.
3. Better Risk Assessment and Management
Agile management in the supply chain allows companies to respond to disruptions efficiently. It is important to deploy predictive analysis tools for risk assessment. Responsible supply chain management also results in proactive action with respect to quality control. Businesses that do so are not just able to predict risks but also have corrective solutions in place to dodge or cover the losses they might incur from disruptions.
As per a study, 87% of companies believe that iterative risk assessment and management can help supply chains reduce inventory by 22%. With access to real-time, fact-based data, companies can predict demand more accurately and avoid what is known as the bullwhip effect in the supply chain.
4. Improved Relationships
Supply chain management involves fostering profitable relationships with suppliers and distributors. Strengthening collaborations with vendors through effective communication and cooperation helps enhance productivity and cut down costs.
One of the main advantages of supply chain management is that businesses have software and performance metrics that allow them to make meaningful decisions when it comes to choosing their suppliers or vendors. Their cost structure, quality control measures, and timeliness determine how they would contribute to your supply chain. With analysed and integrated data on their performance, a business can develop and retain productive relationships with vendors and reap functionality from it. This also contributes to the long-term sustainability of a business.
Supply chain management includes inventory management, which when effectively planned and executed can help cut down costs. To maximize the outcome of internal inventory, supply chain management has inventory management software that allows managers to benefit from an on-demand or lean inventory model.
Through this, managers can stock just enough supplies to meet demands and free up valuable warehouse space. This has helped companies pursue precision when it comes to demands which have allowed them to shut down underproductive and unnecessary warehouses and save big bucks while doing so.
This is one of the biggest benefits of supply chain management. With insight into the frequency of orders, in-demand products and services, and a company’s capacity to fulfil orders, businesses are better positioned to control costs and appropriately allocate resources.
Furthermore, with effective accounting management and automated processes, businesses can ensure maximised cost-effectiveness. However, that’s not all there is to it. Automation also means increased accuracy, fewer errors and faster flow of information, which does not just enhance efficiency but also ensures improved cash flow.
6. Qualitative Improvements
Responsible supply chain management directly impacts the quality of a company’s products and services which are produced keeping global CSR standards and guidelines in mind. This compliance contributes to sustainability and customer gratification.
This is important because the cost to repair or replace an item due to quality issues is significantly high which can hurt companies on a budget. A smooth-functioning supply chain has documentations and quality compliance guidelines in place to streamline quality control when it comes to suppliers and partners.
This usually includes ensuring that suppliers offer timely deliveries, conduct quality assessments, and provide complaint resolutions. Based on these metrics, businesses can partner with suppliers who adequately adhere to these standards.
7. Reduces Legal Liabilities
Effective supply chain management helps companies avoid negative publicity and legal liabilities that result from violations of global CSR standards.
When businesses have indicative data of where risk might lie, they can better mitigate the liabilities, be it through any protective strategy – insurance policies, upgraded resources, new technologies or improved work processes.
8. Reduces Delays
An important advantage of supply chain management is that effective dialogue and coordination result in reduced inconsistencies in distribution, logistical errors and delays in production and shipment.
Inefficient shipping methods do not just cause hold-ups in the supply chain but also result in increased costs. As per Logistics Management’s The State of Logistics Report, transportation costs had risen by 6% to 7% in just one year in 2017. To combat the increased costs, shipping optimization is necessary to ensure goods and services are shipped faster. This in turn helps improve customer satisfaction.
9. Uninterrupted Cash Flow
One of the main benefits of supply chain management is that it contributes to data-driven decision-making and profitable partnerships. There are also tools and technologies in place to conduct predictive analysis of potential risks to respond to changes and disruptions better.
As a result, we have a smooth-functioning supply chain where customers are satisfied and invoicing processes can be streamlined. This does not just reduce overhead costs but also ensures improved cash flow for a company to conduct daily operations. Effectiveness in supply chain management and uninterrupted cash flow maximizes a business’s productivity and drives growth.
10. Benefits of Technologies
The role of digital technologies in enhancing the functionality of supply chain management is unmissable. From efficiency, performance and risk management to quality and customer experience, technology plays an important role in streamlining every aspect of the supply chain.
As businesses embrace cloud-based computing, supply chain management is benefiting from upgraded systems that allow managers to stay connected to operations even when they are on the move. With cutting-edge software and comprehensive tools in place, businesses can scale their services sustainably and in a cost-efficient manner.
It also gives them a competitive edge in the market with the quality they can manage using automation tools that allow seamless integrations of new suppliers and work processes. There is a huge reduction in delays, errors and costs. And the result is improved customer experience and convenience.
Future of Supply Chain Management
As the world quickens its pace, the onus is on management professionals in the supply chain scenario to upgrade their skill sets in a manner that would allow them to progressively contribute to an organization’s success. This also opens up doors for them to pursue attractive career advancement opportunities and grow professionally.
If you are looking to get an end-to-end understanding of supply chain management, we recommend pursuing a Master’s degree in Integrated Supply Chain Management. UpGrad offers a 6 months online course from Michigan State University that has been ranked #1 for Supply Chain/Logistics Graduate Degree Programs by U.S News & World Report for four years in a row (2018 – 2022).
Learn Supply Chain Analytics Courses online from the World’s top Universities. Earn Masters, Executive PGP, or Advanced Certificate Programs to fast-track your career.